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Macro Musings with David Beckworth
Steven Kelly on the Challenges of Treasury Equity Funding for 13(3) Facilities
Feb 17, 2025
Steven Kelly, Associate Director of Research at the Yale Program on Financial Stability, dives into the Treasury Equity Model used in the Federal Reserve's emergency lending. He discusses its historical context, focusing on the 13(3) facilities and their evolution during crises. Kelly highlights challenges of equity funding amid recent banking turmoil, and critiques how political dynamics complicate fiscal decisions. The conversation also touches on the balance between liquidity needs and moral hazards, illustrating the intricate dance between finance and policy.
48:31
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Quick takeaways
- The Treasury Equity Model highlights the complex interplay between Treasury funding and the Federal Reserve’s autonomy in emergency lending decisions.
- Recent shifts in banking regulations emphasize the need to reduce stigma around the Fed’s discount window to encourage its more effective use.
Deep dives
Impact of Regulatory Changes on the Discount Window
The discussion highlights recent shifts in the banking regulatory landscape and their implications for the use of the Federal Reserve’s discount window. There are ongoing efforts by regulators to promote increased usage and reduce stigma associated with this facility. Potential changes could include integrating the discount window into existing liquidity regulations, thus improving its appeal to banks. The conversation underscores the importance of understanding how these regulatory dynamics evolve under different administrations.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode